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Holiday 2012 has been an interesting selling season. Consumers are cautiously optimistic, planning to spend slightly above what they did in 2011, though the economy / unemployment are still troublesome and the fiscal cliff could still turn out to be the Grinch who stole Christmas. Undoubtedly, though, the shining star of the season has been the resurgence of gift cards.

While gift cards have been perennially touted as the perfect last-minute gift, a look at this year’s insights shows us that gift card buying patterns are shifting. For 2012, consumers aren’t waiting until Christmas Eve for these purchases; they are checking them off their lists much sooner. According to the National Retail Federation, nearly one-third (32.6%) of Black Friday Weekend* shoppers made a gift card purchase, up a whopping 40% from a year ago (23.1%). Further, as of the first week of December, holiday shoppers overall continue to pace ahead of previous years’ buying habits; two out of five (39.2%) have already purchased these stored-cash cards as gifts this season, up 25% from 2011 (31.4%).

So is 2012 shaping up to be the Year of the Gift Card? You betcha. So let’s take a look at three reasons why gift cards are a “must buy” among holiday shoppers this year.

1. We want gift cards – badly.

While they have been atop consumers’ wish lists since 2007, intent to buy gift cards sputtered during the recession as consumers reached for bargain merchandise that wouldn’t quite reveal the total dollar amount paid. This year, though, a record number of consumers are requesting them (59.8%, much higher than the second most request gift – apparel and accessories – at 49.1%), and a record number of shoppers are responding that they are planning to buy them (59.2%, nearly eclipsing the most purchased category – again apparel and accessories – at 59.7%).

Bonus: Buying a gift card spares the giver and receiver from that awkward “here’s the receipt for the return” exchange.

2. Gift cards are still practical gifts.

Gift cards may be tempting this year because they can still be perfectly practical, which is on what the near majority of consumers are remaining focused in this uncertain economy. Recipients can buy what they want or what they need – and either way, it’s money well spent on behalf of the giver and better than a sweater relegated to the back of someone’s closet, no? Shoppers may have a little extra cash in their pockets this year, but if they are going to spend their hard-earned (and hard-saved) pennies, they’ll do it wisely. And remember, a $50 gift card to a discounter might be one man’s (or woman’s) groceries at Target but another’s new home décor from Tar-Zhay.

Bonus: And speaking of sweaters, gift cards are one-size-fits-all, so no worrying about whether or not Aunt Clara really did lose that 10 lbs. this year when debating between a medium and a large [oy].

3. We can buy gift cards “on sale.”

Back in the day (so…five years ago), buying a $50 gift card meant that the purchaser would fork over $50 cash. And these days, with retailers and restaurateurs bending over backward to bring customers through their doors, it seems that incentives to buy gift cards are becoming increasingly creative as well as prevalent. Nowadays, a $100 gift card might come with a $20 bonus to use later (Merry Christmas to me, right?) Or, and this is one of the examples I saw a few times during my Black Friday exploits, a pack of five $20 gift cards might be discounted 20% to $80. Gift card purchasers may also be receiving more indirect incentives to purchase, such as grocery stores offering frequent shopper / fuel rewards or salons giving away coupon books for future services with gift cards purchases.

Bonus: Shop wisely and gift cards purchases can still come with that “you’ll-never-guess-what-I-paid-for-it” cachet, which was the feel good saying among holiday shoppers during the recession.

So are gift cards changing the way we approach shopping for holiday gifts? Certainly. However, when and if gift exchanges turn into gift card exchanges, I’ll bet we’ll see a renaissance of more traditional gift giving.

With the Festival of Lights commencing on the evening of December 8, we thought we’d take a quick peek at the holiday shopping plans of this small but powerful group of spenders.

On average, Hanukkah celebrants anticipated allotting $945 to gifts, décor, cards, food and flowers this year, 26% higher than holiday shoppers in general. Two-thirds of Hanukkah shoppers are also expected to take advantage of the seasonal deals and promotions to “self-gift.” And while gift cards, books/CDs/DVDs, and apparel top their wish lists, they are 35% more like than average to request jewelry this year.

We’ve created the special infographic below to illustrate all of the details:

While several major retailers, including Walmart, Kmart, and Toys R Us, have lowered or eliminated their layaway fees in efforts to spur holiday shopping, new insights from the BIGinsight™ November survey of more than 9,000 consumers reveal that this tactic doesn’t seem to be leading to a rise in this place-it-on-hold-and-pay-over-time purchase behavior. Just over one in ten holiday shoppers (12.3%) indicates they are using or planning to use layaway when shopping for gifts this season, relatively unchanged from one year ago (12.7%).

With a flatlining number of consumers boarding the layaway train for 2012, it appears that this Great Depression-era policy is more bygone gimmick rather than a modern day marvel. However, further analysis of layaway users uncovers a specific type of holiday shopper. So without further ado, let’s take a look at ten characteristics that help identify this special group of consumers.

Ten Characteristics of Layaway Shoppers

1. Layaway shoppers wouldn’t place in a Santa look-a-like contest. Nearly 75% more likely to have children in the household compared to average holiday shoppers, while layaway users might be more prone to play Santa this year for the kiddos, they just won’t look like the jolly old guy. Six years younger on average than typical holiday shoppers, layaway-ers are also far less likely to refer to themselves as “retired.”

2. Despite tighter budgets, layaway-ers intend to spend more this holiday season. As might be expected, those utilizing the budget-friendly aspects of layaway tend to earn less (about $49,000 per year) than holiday shoppers in general ($56,000/year). Despite this, though, two out of five (41.6%) layaway shoppers intend to spend “more” on the holiday season this year than they did back in 2011. Just 21.0% of shoppers in general are working within expanded holiday budgets this year.*

3. Layaway shoppers have a holly jolly outlook for the economy… Consumers reported that they were feeling better about the economy in November, but the sentiment among layaway users is downright giddy: 54.7% say they are very confident/confident in chances for a strong economy, much higher than typical holiday shoppers (40.4%). The issue of employment, though, is another story. About a third (32.7%) of layaway shoppers fears an increasing in the number of layoffs over the next six months, higher than holiday shoppers in general (22.0%). Layaway-ers are also slightly more concerned about becoming laid off themselves.

4. …Yet remain conservative with their everyday finances. Lower average incomes and greater concerns for layoffs are likely playing into layaway shoppers’ penchant for scrimping and saving in their everyday lives. Compared to holiday shoppers in general, more layaway-ers are making plans to pay down debt (38.6%), decrease overall spending (35.4%), and increase their savings (32.5%) over the next three months. Additionally, a higher proportion (28.6%) is attempting to pay with cash more often, which brings us to point #5…

5. Cold hard cash is key with layaway shoppers. For holiday purchases specifically, while debit cards are the preferred method of payment among layaway shoppers (49.9% plan to use them most often), more than a third of (35.5%) still plans to utilize cash most often, 40% higher than holiday shoppers in general (25.2%). Layaway shoppers are 60% less likely to use credit cards most often for holiday purchases than typical holiday shoppers.*

6. These early birds are getting the worms… Arguably one of the brightest benefits of using layaways services is the ability to place a hold on hot holiday merchandise before it flies off the shelves. So it shouldn’t come as a surprise that – as of early November – seven out of 10 layaway users (69.1%) had begun their holiday shopping as opposed to just 52.8% of holiday shoppers in general.*

7. …But still plan to bargain-hunt with the best of ‘em on Black Friday. And speaking of early bird tendencies, layaway shoppers are quite the night owls too: the majority (56.3%) is planning to shop Black Friday weekend, making them 75% more likely to brave the crowds than typical holiday shoppers (31.5%).*

8. Layaway shoppers use their connections to find best deals. While traditional advertising circulars are their top source for keeping track of holiday sales and promotions, layaway shoppers are more likely to connect on Facebook or Twitter, use retailer apps, and refer to coupon websites (i.e. RetailMeNot.com, FatWallet.com) compared to holiday shoppers in general.*

9. While they embrace their inner fashionistas, it’s electronics and toys that are bound for the layaway bins. While layaway shoppers are more likely to lean to familiar fashion labels and the newest trends/styles versus holiday shoppers in general, apparel is less likely to be put on hold compared to electronics and toys.

10. Discounters are most likely to get those layaway dollars. When it comes to the retailers shoppers are utilizing for layaway services, discounters score a definitive win here. Nearly two-thirds (65.5%) of holiday shoppers planning to use layaway this season will head to Walmart, while 42.2% say they will sign up with Kmart. Fewer will make use of the programs at Toys R Us (21.2%), Sears (15.2%), Burlington Coat Factory (12.4%), Marshall’s (12.1%), or TJ Maxx (9.9%).

* Source: National Retail Federation/BIGinsight™. For more insights on the holiday season, visit the NRF’s Holiday Headquarters.

And NEW this month is the Consumer Snapshot InsightCenter™. When you register for complimentary access to this new InsightCenter™, you’ll have the ability to segment an advance preview of our all-star insights on consumer confidence, employment, shopping strategies, and future purchase plans by several key demographic groups. You can also download this month’s text summary (which includes additional insights) as well as the PowerPoint analysis through this InsightCenter™.

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This week, the National Retail Federation announced their 2012 holiday forecast, predicting that sales will rise 4.1% over 2011 to $586.1 billion. The sales growth is expected to be slightly higher than the 10-year average holiday sales increase (3.5%), though pacing below last year’s growth (5.6%). With holiday shoppers gearing up for spending, let’s take a look at the “state of the consumer” as we head into this all-important selling season for retailers:

Confidence is UP, but Feelings are Volatile. In the BIGinsight September monthly survey of more than 9,000 consumers, 38% indicated that they were very confident or confident in chances for a strong economy. This was a high reading for 2012 and a vast improvement over the September 2011’s 23%, when consumers were still reeling from the debt crisis. Confidence is riding a four-point upswing from August to September, but don’t look for this indicator to continue to improve at this pace – 2012 has been a rollercoaster ride for sentiment and continued fluctuation is expected headed into Q4.

The outcome of the “fiscal cliff” drama on Capitol Hill remains big question mark for the sustainability of confidence – as well as holiday sales. Should we fall off that precipice – and realize an average 2013 tax bill increase of $3500 – holiday budgets are bound to shrink. Adding to the precarious position of the economy? Our continuously weak job market. And the upcoming Presidential election also adds to the uncertainty.

Frugality is a Fixture in Consumer Finances. Along with the relatively robust increase in consumer confidence in September, we also witnessed similar increases in those focused on practical purchasing and buying just the necessities. In fact, both indicators are in line with what we saw a year ago, when confidence was just 23%. So yes, Virginia, despite the more positive outlook for the economy, consumers are still being very cautious with what they spend – even as we look forward to the holiday shopping season.

Expect holiday shoppers to stick to budgets, avoid impulse buys, continue smart shopping strategies, such as couponing, sales/promotions, and comparison shopping, as gift-buying commences. Frugality continues to be the name of the game with consumers because they know the economy isn’t “fixed.” Paying down debt and reducing spending remain fiscal priorities headed into the final three months of 2012, while plans to increase savings reached a six-year September high last month, so it appears that consumers may be preparing for holiday shopping as well as those everyday unknowns.

Pricing uncertainty in key areas, like grocery, gas, and apparel, continues to be of concern with consumers. An increasing number of shoppers are relying on their credit cards more compared to September 2011 when purchasing such staples – so we are still seeing signs of struggling consumers. (i.e. Holiday ’12 won’t herald a season of “recovery.”)

However, if it can be avoided, shoppers won’t make this Christmas on credit. Year over year, fewer are paying off just the minimum monthly balance on their cards, while we’ve seen a slight rise in those carrying $0 average monthly balances. The past four years have been a tough road for consumers, but they do appear to be focusing on not falling back into the lax spending/savings patterns that got them into a mess back in 2008.

Consumers Know They Have the Upper Hand with Retailers. Can we call this retail transparency? The rising popularity of mobile devices has taken much of the mystery out of shopping for customers holding a smartphone or tablet. They can compare prices, check availability, and even click “buy” from virtually wherever they are located, and shoppers will work all angles – online, instore, mobile, social media, coupon sites, direct mail, email, and ad circulars – to make sure that their holiday spending remains on budget. It’ll be a spending game that consumers want to win.

However, we know that all retailers can’t compete on low price alone [I’m looking at you, Best Buy.] Great customer service and personal rapport with shoppers will be key in driving traffic to retailers who aren’t low-price providers. Product selection, availability, and brand assortment – something department stores having really honed in on in the past few years – will also serve to turn shoppers’ heads this season. “Cheap is chic” is SO 2008; today’s shoppers want value and are willing to pay a little more for quality – as long as they can use a coupon.

2012 hasn’t been kind to JC Penney. And, it doesn’t appear that Q4 will get any better for the department store, which has struggled to shake up its stodgy image this year and in the process has rattled its core customer base. According to the Prosper Spending Index, JC Penney shoppers’ outlook for holiday gift spending falls below that of the general population, with an index of 95.9 (baseline index = 100).* Among JC Penney shoppers with holiday spending plans in mind, two in five (44.2%) plan to spend less on holiday gifts this year than they did for 2011, while fewer than one in ten (7.4%) plan to spend more.

As could be expected, the holiday spending outlook is similar among those shopping Walmart (index = 94.4). Still, a slightly larger proportion of shoppers at the discounter, known to cater to more cash-strapped, lower income households, plans to spend more for the upcoming holiday season (9.5%) compared to JC Penney shoppers (7.4%).

Among the customers analyzed, shoppers at Macy’s, a retailer which has arguably benefited from JC Penney’s EDLP strategy switch-up, maintain the most positive outlook on holiday gift spending, with a Prosper Spending Index of 110.9. TJ Maxx loyalists also hold a brighter-than-average outlook (index = 106.3). Target (102.4) and Kohl’s (101.0) shoppers’ holiday spending plans are in line with the overall average.

So we know JC Penney shoppers will be trying to cut back on their holiday gift spending this year, but just how do they intend to accomplish this?

Memo to Ron Johnson: Your shoppers (or what’s left of them) are still motivated to buy based on sales and coupons.

Among JC Penney customers, nearly half say they are shopping for sales more often (45.4%) and/or are clipping coupons (42.1%) in efforts to help balance their budgets – higher than the overall average. Among the retailers mentioned, Kohl’s shoppers – rabid for that Kohl’s Cash – are the only ones eclipsing both of these figures.

With economic uncertainty pervading consumer mindsets, today’s shoppers – JC Penney’s included – continue to possess an innate need to feel good about spending their hard earned dollars, particularly when it comes to spending on those not-so-essentials like gifts and apparel. And in shoppers’ “feel-good” toolkit are coupons, weekly promos, and special sales. These items are, of course, generally absent from JC Penney’s promotional strategy – setting the department store up for additional customer loss during the critical holiday season.

Think about it like this: getting a $60 sweater on sale for $30 is something to write home tweet about. Simply buying a sweater for the $30 ticket price? It’s a little ho-ho-hum.

* Holiday outlook insights are based on celebrants who have holiday spending plans in mind.

With the Back-to-School shopping season just around the corner (or already here according to some of the ad circulars I received over the weekend), we’ll soon be looking ahead to that all-important holiday shopping season. And while spending specifics are still a little off on the horizon, we queried the 8500 consumer respondents in our July Monthly Survey about the direction they anticipated their holiday gift budgets to take for 2012: north, south, or even keel from the previous year.

While nearly three out of ten (28.1%) admitted that it was too early to tell, among those with a budget in mind, 10.2% are planning to spend more this year compared to last (up from 6.5% in Jul-11). Before you start ringing those jingle bells, though, keep in mind that the vast majority of shoppers plans to spend at (46.3%) or below (43.4%) their 2011 gifting budgets. Of course, holiday 2012 spending plans vary by generation*, which brings me to the subject of this post.

Among shoppers in general planning to spend less, three out of five (58.9%) stated that they were simply going to cut budgets across the board. A large proportion is also planning to buy gifts only on sale (41.3%) or do more comparison shopping (33.5%) – so it looks like mobile devices may play key roles for these shoppers this year. #showrooming

Plans for spending less become all the more interesting when we look at this data divvied up by generation:

– Not on Sale? Not for Me: Boomers (45.6%) and Silents (43.7%) are the most likely to scrimp on budgets by only buying on sale. Gen Y (35.9%) is the least likely to be swayed into saving using this method.

– Pause My Purchase, Please: One out of ten of those in Gens X (9.6%) and Y (10.9%) are curbing gift budgets by utilizing layaway a bit earlier this year. This number drops with advancing age; just 3.9% of the Silent group plans to put gift purchases on hold.

– This is Pinteresting: Nearly three out of ten (29.4%) Gen Y-ers plan to pinch the pennies by making homemade gifts. Gen X indexed on average, while Boomers and Silents are less likely to do so. Perhaps this social media site is inspiring more DIY-ers among the younger generation?

Stay tuned…the holiday shopping season is shaping up to be pretty interesting this year.